Here is a question:

If the government can simply print money…….why do they need to tax us?

They don’t need our money at all.  They have the blank check of the printing press at all times.  They could simply spend new money into existence, and leave it at that.

As long as they didn’t print so much that it devalued the currency, it would work fine.  That’s the same basic issue they have now (even with taxes), so that isn’t much of a shift.

Honestly, I can’t think of an economic reason (can anyone else?).

The cynic in me says there are two good psychological reasons to tax:

  1. Incentives:  If the government taxes one thing (or gives a tax credit on another) it can influence our behavior.  That’s what the government does…..governs/influences/controls.
  2. Government spending and the value of money would be more obvious:  People would realize printing more money devalues the money they already have; it is like theft.  They would equate inflation with theft, knowing the government printed too much (perhaps for war) and that took part of the value of the money that they’d already saved.  On another note, tax evasion would be impossible, since there wouldn’t be any taxes.

Another good question is why we allow governments to run deficits.  The flip side of the original question is:

Why do we allow the government to run the printing press?  Why not force them to spend ONLY tax revenue?

This would produce an even more dramatic outcome than ceasing the printing press:  NO MORE FOREIGN WARS.  If we had to pay each year the full cost of our military and were forced to choose between wars and education or health care (or being taxed at 100% of our income so that we’d starve)….we would always choose domestic issues.  This would also naturally limit the size of the government (since they’d no longer have a blank check).  Government spending could only grow as the economy grew (or shrunk).

Economists argue against this as they cite that governments need to issue debt to undertake large scale activities (wars, stimulus, etc.) that would be impossible if they had to pay for it each year.  I understand this argument and agree to a certain extent….and will only point out that Economists are full of shit and can’t predict as a group whether the sun will come up tomorrow.  As the new day rose and even into the sunset they would still be arguing about whether the sun was actually there at all.

I say the government and its band of inbred, self-serving economists whose theories have no relation whatsoever to reality (and cause us to have to bail them out) should be limited in a natural way.  Perhaps tax-revenue-only spending would be the answer.

I actually know why governments don’t choose this option: it causes them to get overthrown.

In the old days of gold currencies, the governments could only spend the amount of gold they had.  They had to go find new gold to fight wars and they taxed until it impoverished their people.  The people then overthrew the government.

Then one day a nifty, smart group of revolutionaries figured out that with fiat currency they could get around the spending limit problem and just borrow continuously from people who weren’t born yet.  The first groups failed because they got greedy with the printing press, which also impoverished their people…..who then overthrew the government again (notice the theme?).

Then the governments figured out they needed a Goldilocks printing press….print enough, but not too much to impoverish their people.  It doesn’t matter though that they know; it is always easier to mortgage the future than it is to pay in the present….and so all governments will succumb to the temptation of the printing press…and get overthrown as they impoverish their people.

I guess the final question, if I were a government, would be:

Why not both tax us and print money?

Why not have the best of both worlds?  No need to limit yourself to just one of those two options.   Indeed, why not?  I guess, unfortunately, that is the answer.

Tags: ,
Leave a Reply